The head of the Bank of Canada, Mr. David Dodge, made some comments on Friday that I find pretty peculiar. Giving them some thought, it is little wonder why the average person does not fully grasp all the fine nuances of our economics. I am sure that there is much that I myself don’t understand, but the words of Mr. Dodge just made that worse.
While ruminating about the economy, Mr. Dodge lamented the fact that soon the baby boomers would stop their spending free-for-all, and would perhaps wise up and start to save. This, we are told, will be bad for the economy. As the boomers start pinching their pennies, demand will fall and so will production. It seems that with all of the tinkering and manipulating our economists and bankers do with our economy there are still some things that are controlled by us, the little people. I wonder if we keep them awake at night?
A while back, I wrote a series of articles on our banks, and explained that as our banks now need no reserves to lend money, they can ‘invent’ new cash as fast as they want. It now seems obvious that the government relaxed the reserve requirement to artificially stimulate the economy into growing. It worked fabulously, unless you count all of the record years for bankruptcy that we had between 1990 and 2000 as negative factors, as I do. The 2004 figures come in only a few hundred bankruptcies lower than the record of 85, 297 personal bankruptcies, set in 1997, and are now on the increase once again. As for any topic, the fundamentals don’t change. What goes up, must come down. I don’t understand why we still don’t believe that.
The governor of the Bank of Canada says that he can see oil prices reaching $100. per barrel and beyond, and states that this should only cause a little blip in our country’s economic performance, and is no cause for concern. Apparently Mr. Dodge does not have to pay for his own travel expenses like average Bob, who has to drive for an hour each way to work, nor does Mr. Dodge have to sit idle on the congested Hwy. #401 in Toronto everyday. For those people who have embraced the Canadian economic debt culture, $100 dollars a barrel will spell even more personal bankruptcies. The gas prices will start to strangle more and more people the higher they rise. We all have a point at which we can no longer afford to be productive.
We have been told for the last 20 years by the banks that we should ‘pay ourselves first’ and that we need x amount of dollars to enjoy the retirement lifestyle that we hope to have or that we have already become accustomed to. Now we are being told that this behaviour will stall our economic engine. I truly wish they would make up their minds.
Some of us are smart enough to know that debt is like an anchor, and in fact it is. You have heard the saying that their is good debt and bad debt, and I guess if you wanted to stretch some of the ideals, you could make it seem that way. Of course, having the money for something on hand is always better than debt. With oil prices continuing their spike, it is only a matter of time before the increased cost of producing and shipping the goods and foods that we rely on is passed down to us.
To think that the Bank of Canada is more concerned about our ability and determination to save money says a whole lot. It provides confirmation that the government has helped encourage our current fiscal irresponsibility to simply stimulate the economy for their own political and financial gain. No longer are our children taught to save their money, but instead are taught how to acquire credit and to maintain a healthy credit record. What a shortsighted concept. It is no wonder so many of us are living in ‘paycheque to paycheque’ mode.
I regularly have a credit company call me to tell me that I can borrow up to $10,000. and that all I have to do is say yes. I finally asked the girl one day why I was approved. She told me it was because of my high credit score, and because of my debt ratio, which means that I don’t have a lot of debt to carry around. I went on to ask her if she knew why my debt ratio was so low. She replied that she didn’t, so I politely informed her that is was because I didn’t take all of the credit I was approved for, and I quickly hung up the phone. Talk about trying to ensnare people into more debt.
If you think that the government doesn’t sit around trying to find ways to wrestle your money out of you and into the economy, consider the words of Mr. Dodge, who stated that the aging of the baby boom generation will see savings skyrocketing, unless central bankers and other policy makers act now. Our government is actively seeking ways to free up the savings that you and I feel inclined to hold onto. Could that be the reason for the low interest rates?
Furthermore, he states that policy makers must start to address the longer-term threat of overly large savings triggering a protracted global slowdown. One method he proposes? A further increase in spending on universal social safety nets to assure consumers that they do not need to hoard their cash to secure their retirement. That would explain the ever expanding government. Apparently it all revolves around money. Ah, the oil that lubricates our leaders.
I believe that this is where the brunt of liberalism is failing us. We are convincing people to trust the government to wipe their bottoms when they get older, when in fact we should be teaching our citizens to be responsible for themselves. Apparently self-sufficiency isn’t conducive to liberal economics. No wonder things are such a mess.